I recently made a presentation at a virtual conference, and an audience member asked me to name some of my favorite value sectors. I had a few answers, but let me start with what I would avoid, namely financial stocks.
Financial stocks are statistically cheap and comprise a significant weight in most value indices. However, they have a number of challenges not encountered by other value stocks. Bloomberg reported that the Biden transition team is made up of people with a bias towards greater financial oversight and regulation, such as Gary Gensler:
Gensler is the biggest name with Wall Street ties who’s part of the agency-review process. He is a former Goldman Sachs Group Inc.partner who joined President Bill Clinton’s Treasury Department. Gensler was later appointed CFTC chairman by President Barack Obama.
His role in Biden’s transition might make some on Wall Street uneasy. When Gensler led the CFTC, he implemented new rules that made him a scourge of banks’ lucrative swaps-trading desks. He also pushed investigations into the manipulation of benchmark interest rates that resulted in firms paying billions of dollars in penalties.
Others on Gensler’s team include Dennis Kelleher of Better Markets, a group that advocates for tougher regulation, and Amanda Fischer, the former chief of staff to California Representative Katie Porter, who also supports tighter market rules.
Energy skids to the smallest sector in the S&P 500
A different kind of Thanksgiving Turkey
Turkish equities are cheap, both on an absolute basis and relative to their own history. This is a washed-out market. The Turkish central bank is expected to meet on Thursday, and the market expects a significant increase in the one-week repo rate. Watch for fireworks.
The relative performance of these two countries is tracing out constructive patterns indicating that they are becoming immune to bad news. Turkey rallied and regained a relative support level, and Malaysia is testing a key area of relative support.
Disclosure: Long TUR